Dollar PPA for hydel projects above 100 MW

It is good news for foreign investors in the hydropower sector, as the government has ensured power purchase agreement (PPA) in dollar terms for projects with capacity of above 100 megawatts.

Developers will be able to sign grid connection agreement with Nepal Electricity Authority (NEA) — the sole power off-taker of the country — for the payback period of foreign loan or for 10 years, whichever comes first. Organising a press conference, today, Minister for Energy Janardan Sharma said that this move of the government will provide necessary impetus for foreign investors to invest in Nepal’s hydropower sector.

Likewise, the Ministry of Energy today informed about the new rates for peaking run-of-the-river (PRoR) and reservoir projects. The developers of PRoR and reservoir projects will be able to sell their energy to NEA at the new tariff level. This provision has already been enforced from May 27 and the generators of reservoir projects who completed their projects after May 27 can sell per unit of electricity at Rs 12.40 during dry season (from December to May) and at Rs 7.10 during wet season (from June to November), as per Minister Sharma.

Likewise, for PRoR projects, rates have been set at Rs 10.55 and Rs 4.80 per unit for dry and wet seasons, respectively.

In addition to these new rates, NEA will also provide additional three per cent as inflation adjustment to the power generators for the initial eight years.

The PRoR projects can be operated for at least four to six hours in the peak hours. Normally, electricity demand goes up in the mornings and evenings. Developers now have to meet 30 per cent of the total energy production in the dry season. Along with extension of the dry season period from four months to six months, NEA has also raised the dry season energy requirement from 15 per cent (of the total capacity) to 30 per cent.

To meet this provision, power plants need to operate in full capacity for a longer period and developers have to lower the capacity of the project to meet the energy demand during dry season.

NEA, however, has still not scrapped the earlier provision of a four-month dry season (mid-December to mid-April) and 15 per cent energy requirement during dry season for run-of-the-river projects. By opting for this provision, the generators will get the dry season rate of Rs 8.40 per unit for four months. This provision has also paved the way for those wanting to design projects in high capacity eyeing advantage of generating more power in wet season as the plant can be operated in full capacity during wet season.

The Ministry of Energy has said that it will ask the Ministry of Finance to compensate any loss that the NEA could face while adopting the new tariff structure.